Monday 27 May 2019

Buffett partner and New York VC fund backing broadband

Technology Editor Adrian Weckler reveals the inside story on who's financing the NBP tender and, with more delays in the pipeline, when it will now be rolled out to rural homes and businesses

Meeting row: Minister for Communications ons Minister Denis Naughten defended his New York meeting with businessman David McCourt and said it was covered by Mr McCourt’s existing investment
Meeting row: Minister for Communications ons Minister Denis Naughten defended his New York meeting with businessman David McCourt and said it was covered by Mr McCourt’s existing investment

Adrian Weckler technology editor

Warren Buffett's business partner, Walter Scott, is to help bankroll the consortium aiming to win the Government's National Broadband Plan tender.

Members of the Nebraska-based billionaire's family were in Dublin this week to discuss the matter. It has also emerged that Oak Hill, the New York venture capital firm that sold its 47pc share in telecoms firm Enet last year, will also play a part in the consortium's financing.

The Irish-American businessman David McCourt, CEO of the consortium bid leader Granahan McCourt, will also invest money into the venture.

Mr McCourt recently agreed a deal to sell his company's remaining stake in Enet to the State-backed Irish Infrastructure Fund (IIF), although no transaction value was disclosed. The telecoms company was recently valued at between €150m and €200m, suggesting a range of between €30m to €40m for the 22pc stake held between Granahan McCourt and Walter Scott.

Details on financing were a key demand from the Government according to recently released documents from the Department of Communications.

The bidding consortium has recently courted controversy because of the withdrawal of the multibillion-pound UK energy giant, SSE, and the British specialist investment firm, John Laing.

The consortium is now led by Granahan McCourt with around 40 sub-contractors, including the KN Group and Denis O'Brien's Actavo, formerly Siteserv.

It will still base a large part of its infrastructure on Enet's metropolitan area network rings, which serve 94 regional Irish towns.

The National Broadband Plan is a government-subsidised initiative to physically connect 540,000 rural homes and businesses to high-end fibre broadband.

While the Government has indicated that the first homes will be connected early next year, this now looks unlikely.

If the Granahan McCourt-led consortium achieves preferred bidder status in the coming weeks, it will then likely take a further number of weeks or months for the company and the Government to sign a contract. At that point, while some of the network's design will have been prepared, much of the practical work associated with it will need to be undertaken.

Industry and government estimates now put the likely date of the first 'passed' homes at late 2019, possibly into 2020.

The Government says that the majority of the 540,000 premises to be connected will be hooked up within the first 18 months of the network build. However, the Government is starting to concede that it may be beyond 2021 - the current completion target - for all rural premises to be connected.

The vast majority of the NBP rural connections under the scheme will be physical fibre lines, capable of substantially faster speeds than city and urban homes at present. However, tens of thousands of the most far-flung, rural premises will connect to the network using wireless technology.

The National Broadband Plan has suffered a series of delays, with Government officials striving to ensure compliance with a variety of different procurement rules and industrial tensions.

The process has also suffered some competitive setbacks, with both Eir and Siro (the joint venture between Vodafone and the ESB) withdrawing from the competition, citing unfavourable economic conditions.

That has left the current consortium, comprising Granahan McCourt, Enet and others, as the sole remaining bidder for the tender contract. At the end of the 25-year contract, the winning bidder will own the rural network, although this will likely be subject to stringent regulatory oversight if it remains the only high-speed telecoms infrastructure in those areas.

Mr McCourt recently became embroiled in controversy when Communications Minister Denis Naughten attended a dinner he hosted. Opposition politicians say that the meeting was inappropriate because of the ongoing tender consideration. However, both the businessman and Mr Naughten dismissed criticism of the meeting, claiming that Mr McCourt's €100m telecoms investment in Ireland to date qualified him to meet Mr Naughten, regardless of the National Broadband Plan tender.

Mr McCourt said that the reason he invited Naughten and his officials to the July dinner in New York was to reassure them that a series of concerns that had arisen regarding the bid tender had been resolved. "The dinner was prompted by me," he said. "The minister's department had brought up some issues and wanted them resolved, saying that if they weren't we were at risk. All I wanted to do was to make sure they knew that those issues were being resolved. If I couldn't have got hold of the minister I would have called the Taoiseach to say that I understand the seriousness. It was important."

Mr McCourt said that as a major telecoms investor in Ireland over the years, he would have been "p****d off" if Mr Naughten had declined to meet him.

According to minutes of the conversation between Mr Naughten's party and Mr McCourt released by the Government, department officials were pressing for "a permanent, Irish-based, leadership position" within the consortium, a need for "streamlined decision making processes" and the need for any changes within the consortium to be avoided "or, if necessary, to be kept to a minimum".

The officials also pressed for "the need for the necessary financing to be in place" by August 15. All of these issues, Mr McCourt said, have been met.

Mr McCourt has also denied that businessman Denis O'Brien is "part of the consortium", saying that Mr O'Brien's Actavo firm was "merely a sub-contractor" and that he had not spoken to Mr O'Brien.

He also refuted the claim that selling his stake in Enet represented any detachment from the National Broadband Plan process on his part.

"There is no change in the consortium's goals," he said. "Granahan McCourt was always the lead entity in this consortium. We led the consortium since the pre-qualification questionnaire was submitted in March 2016 and as we are now looking ahead to delivering the NBP, and in order to fully commit our time, energy and resources to this ambitious project, we have taken the decision to sell our remaining stake in Enet.

"I have long believed that the provision of world-class connectivity needs to be viewed as a vital utility and Enet continues to play a significant role in solving this problem for many citizens across the country. I have been proud to have been part of the company's ownership structure and wish the team a successful future."

The IIF is managed by AMP Capital and Irish Life Investment Managers.

"The Irish Infrastructure Fund is delighted to acquire the remaining 22pc in Enet, bringing the IIF's stake to 100pc," said AMP Capital's Philip Doyle, principal of the Irish Infrastructure Fund.

"Since we acquired a majority stake in the business in August 2017, the company has demonstrated the high quality of its business and its potential for growth. Enet, via its operation of vital telecoms infrastructure, has developed a great business that is both commercially focused and policy supportive."

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